Fact that procedure envisaged by section 153C is somewhat cumbersome and tha

 Fact that procedure envisaged by section 153C is somewhat cumbersome and that person other than searched person is put to some inconvenience cannot be an argument to hold that entire proceedings are bad in law

• There can be some inconveniences in a case where income had already been disclosed by other person who has not been searched; however, there is no cause for any apprehension that income tax authorities will exploit situation to harass assessees where there is evidence adduced by them to show and establish that income reflected by valuable article or books of account or document seized during search has already been disclosed by them; even if they tend to act unreasonably or under misplaced enthusiasm, there are adequate safeguards which can be availed of by those persons

• If AO having jurisdiction over searched person reaches satisfaction that document belongs to a person other than searched person, it is not necessary for him to also reach a firm conclusion/ opinion that document shows undisclosed income belonging to such other person; that is a matter for enquiry, which is to be conducted in manner prescribed by section 153C

[2012] 20 taxmann.com 214 (Delhi)
HIGH COURT OF DELHI

SSP Aviation Ltd.

v.

Deputy Commissioner of Income-tax

Primary condition for applicability of section 50 of Act is that asset tran

 

IT : Primary condition for applicability of section 50 of Act is that asset transferred should be a depreciable asset on which depreciation was actually allowed under Act; this section is applicable only in respect of sale of a capital assets forming part of a block of asset in respect of which depreciation has been allowed

• As no rate of depreciation has ever been prescribed for land, it is not part of 'block of assets' as defined in section 2(11)

• As land in question was held from April, 2001 to August, 2005 for a period of more than 36 months (and as deeming provisions of section 50 are not applicable to transfer of land), surplus of sale price over indexed cost of acquisition was rightly shown as long term capital gains by assessee and exemption under section 54EC available since assessee had invested in REC Bonds

Related case law:

• Legal fiction created by statute under section 50 is only to deal capital gain as short term capital gain and not to deem asset as short term capital asset; therefore, it cannot be said that section 50 converts long term capital asset into a short term capital asset-Dy .CIT v. Bharat Enterprises [2011] 14 taxmann.com 110 (Mum. - Trib.)

[2012] 20 taxmann.com 197 (Delhi)
HIGH COURT OF DELHI

Commissioner of Income-tax-IV

v.

I.K. International (P.) Ltd.

Income tax - Whether adjustment made by Revenue u/s 245 can be treated as 'recovery'

 

Whether adjustment made by Revenue u/s 245 can be treated as 'recovery' - YES, rules Delhi HC

NEW DELHI, DEC 02, 2011: THE issues before the Bench are - Whether the provisions of section 220(6) are applicable when an appeal is preferred before the ITAT; Whether adjustment u/s 245 can be regarded as "recovery"; Whether pendency of appellate proceedings by itself alone cannot be a ground not to refund the amount due and payable, and is not sufficient to pass an order of the adjustment for demand on issues which have been decided against the Revenue and whether the conduct and action of the Revenue in recovering the disputed tax in respect of additions on issues which are already covered in favour of the assessee by earlier orders of ITAT and CIT(A) is justified. And the verdict goes against the Revenue.

Facts of the case

The assessee is entitled to refund of Rs.122.57 crores and Rs.107.42 crores for the AYs 2003-04 and 2005-06 respectively. For the AY 2006-07, an assessment order u/s 143(3) read with Section 144C was passed on 20th October, 2010. This created an additional demand of Rs.266.61 crores, (Rs.169 crores on account of income tax and Rs 95,49,06,432/- and Rs.1,91,31,933/- respectively on account of interest u/ss 234B and 234C). Against the said assessment order, the assessee on 19th November, 2010 filed an appeal before the ITAT. Subsequently, on 30th November, 2010, an application for stay of demand was filed. This stay application came up for hearing before the ITAT on 9th December, 2010 and an interim order was passed directing status quo in respect of recovery till 14th December, 2010.

The assessee also filed a letter before the AO informing about the status quo order with copy to the CIT. On 13th December, 2010, one day before the date of hearing, the DCIT informed the assessee that refund of Rs.122.57 crores for AY 2003-04, stands adjusted against the demand for AY 2006-07 vide order dated 7th December, 2010. This communication was made on 13th December, 2010, after the status quo order was passed on 9th December, 2010.

Similarly, the Revenue vide order dated 22nd November, 2010, had made adjustments u/s 245 of the Act for refund of Rs.69.94 crores for AY 2005-06.

The two orders u/s 245 of the Act making adjustment of refunds of Rs.69.94 crores for the AY 2005-06, dated 22nd November, 2010 and Rs.122.57 crores for AY 2003-04 vide order dated 7th December, 2010 but communicated on 13th December, 2010, were made without prior intimation as mandated and required by law.

The contention of the assessee before the ITAT was that the additions or disallowances made in the assessment order dated 20th October, 2010, for AY 2006-07, were partly covered by decisions of the ITAT and the CIT (Appeals) in favour of the assessee and thus demands should not be recovered and there should be an absolute or blanket stay from recovery of the demand in respect of at least the issues which have been decided by the appellate authorities in favour of the assessee. The ITAT instead of examining the said questions while considering the stay application on 20th January, 2011, recorded the statement made by the DR that he had received a letter dated 19th January, 2010 accepting that the earlier action u/s 245 of the Act was bad and proper proceedings u/s 245 would be initiated. Accordingly, the matter was adjourned to 4th February, 2011 "on the request of both the parties".

The assessee filed written submissions dated 27th January, 2011 before the AO, along with the chart indicating how and in what manner, as per the assessee, several issues which had resulted in the additional demand for the AY 2006-07, were covered in their favour by the orders of the appellate authorities in earlier years.

The assessee also filed an application u/s 220(6) of the Act before the AO on 8th November, 2010, that the petitioner should not be treated as an assessee in default and the demand should be kept in abeyance till disposal of the appeal before the ITAT. The ITAT while dealing with the applications was of the opinion that the AO should first dispose of the application u/s 220(6) of the Act.

The AO vide order dated 2nd February, 2011, disposed of the `stay application' and substantially dismissed the same stating inter alia, that refund of Rs.107.41 crores for the AY 2005-06 and Rs.122.57 crores for the AY 2003-04 stand adjusted and that there would be a stay of the balance amount of Rs.36.61 crores pending decision of the appeal before the ITAT, for the AY 2006-07. Another order dated 2nd February, 2011 was passed by the AO u/s 245 of the Act.

The stay application filed by the petitioner thereafter came up for hearing before the ITAT on 11th February, 2011 and the same was disposed of after recording the factual position. ITAT by its order dated 11th February, 2011, held that recovery cannot be equated with adjustment or refund u/s 245. ITAT in this regard has stated that Section 245 does not occur under the Chapter "refund" and, therefore, cannot be equated with recovery. Against this, the assessee filed a writ petition challenging the adjustment of refunds.

Having heard the matter, the High Court held that,

++ whether the stay application u/s 220(6) was maintainable - It may be noted here that the petitioner and Revenue have proceeded on the assumption that the said Section was applicable to the present case though the petitioner had filed an appeal before the ITAT and no appeal was filed before the CIT (Appeals) u/s 246A. The Revenue has rightly submitted that Section 220(6) is not applicable when an appeal is preferred before the ITAT, as it applies only when an assessee has filed an appeal u/s 246 or Section 246A of the Act;

++ an assessee is required to file an appeal before the ITAT against an assessment order u/s 143 (3) read with Section 144C. Appeal u/s 246 or 246A is not maintainable. As per Section 253(1d), against an order under sub-section 3 of Section 143 in pursuance to the direction of the DRP an appeal is maintainable before the ITAT. It may be noted that the ITAT has power to grant stay as an inherent power vested in the appellate authority as well as u/s 254 and the Rules;

++ whether adjustment u/s 245 can be regarded as recovery and the orders passed by the authorities/tribunal - It is not possible to agree with the contention of the Revenue that the word "recovery" cannot and would not include adjustment u/s 245. Recovery can be made by various modes including adjustments. Each AY is treated as separate and independent under the Act. Section 245 of the Act permits the Revenue to recover demand of one year which is pending by adjusting the refund due for another year. The term `refund' has not been defined in the Act and, therefore, it has to be understood and interpreted in the manner in which it is understood in day to day life. The term `recovery' in common parlance includes adjustments;

++ Chapter XVII of the Act deals with "collection and recovery of tax". The said chapter is divided in various parts including deduction of tax at source, payment of advance tax and Part-D is also given the same heading as Chapter XVII "collection and recovery". Chapter XIX deals with refund and Section 245 deals with adjustment/set off of refund of the tax remaining payable in other years. Placement of Section 245 in Chapter XIX relating to refund is a matter of convenience. The provisions relating to `collection and recovery" have been put in an earlier Chapter i.e. Chapter XVII, whereas "refunds" have been placed in a subsequent Chapter XIX. While dealing with the question of refund, the Legislature has provided that the refund can be adjusted or set off against a pending demand. We do not think that set off or adjustment cannot be regarded as a mode of recovery or is not a recovery mechanism. The term "recovery" is comprehensive and includes adjustment thereby reducing the demand;

++ at the same time, different parameters and requisites may apply when the appellate authority considers the request for stay against coercive measures to recover the demand and when stay of adjustment u/s 245 of the Act is prayed for. In the first case, coercive steps are taken with the idea to compel the assessee to pay up or by issue of garnishee notice to recover the amount. In the second case, money is with the Revenue and is refundable but adjusted towards the demand. Thus, while granting stay, the appellate authority or the ITAT (for that matter, even u/s 220(6)), the authority can direct stay of recovery by coercive methods but may not grant stay of adjustment of refund. However, when an order of stay of recovery in simplistic and absolute terms is passed, it would be improper and inappropriate on the part of the Revenue to recover the demand by way of adjustment. In case of doubt or ambiguity, an application for clarification or vacation/modification of stay to allow adjustment can be, and should be filed. But no attempt should be made and it should not appear that the Revenue has tried to over-reach and circumvent the stay order. Obedience and compliance with the stay order in letter and spirit is mandatory. A stay order passed by an appellate/higher authority must be respected. No deviancy or breach should be made;

++ It will be odd for the Revenue to contend that if an issue or contention is decided in favour of the assessee then for the said year refund has to be paid but the refund can be adjusted u/s 245 of the Act, on account of the demand on the same issue in a subsequent year. The broad contention is specious and illogical to be accepted. Similar or same additions can be made in a subsequent year for justifiable cause including contention of the Revenue that they have not accepted the earlier decision but it cannot be accepted as a principle that the Revenue can in ordinary course make adjustments towards a demand on an issue or contention which is already decided in favour of the assessee, though it may be a subject matter of appeal or challenge by the Revenue. Normally in such circumstances, the appellate forum should not permit the Revenue to adjust the demand, for it will be unjust, unequitable and unfair. However, while examining the issue of grant of stay including adjustment, the appellate authority for good grounds and justification made by the Revenue can refuse to grant stay of the adjustment of the refund. In such cases, adjustment can be permitted in exceptional situations pointed out by the Revenue but not as a matter of routine. It may not be possible or proper to postulate and elucidate all such situations but grounds mentioned u/s 241 of the Act are indicative;

++ pendency of appellate proceedings by itself alone cannot be a ground to not to refund the amount due and payable and is not sufficient to pass an order of the adjustment for demand on issues which have been decided against the Revenue;

++ Circular No. 1914 dated 2nd December, 1993 has been issued by CBDT with reference to Section 220(6) of the Act. These are guidelines, when and in what circumstances the demand should not be recovered. This is a reason why in clause (iv), it is mentioned that the words `stay of demand' does not occur u/s 220(6) and the AO should always use the expression `assessee in default' in consonance with the language of section 220(6). Clause (e) occurs and is a sub-clause of clause (ii) of the circular dated 2nd December, 1993. Sub-clause (e) read with (ii) will read as - "In granting stay, the AO may impose such condition as he may think fit" and "he may reserve a right to adjust refund arising, if any, against the demand." The use of word `may' and the expression `reserve a right' clearly shows that the Board itself did not postulate and regard `recovery' as excluding and not covering `adjustment' u/s 245 of the Act. As per the said circular, the AO may reserve a right to adjust, if the circumstances so warrant. In a given case, the AO may not reserve right to refund. Further, reserving a right is different from exercise of right or justification for exercise of a discretionary right/power. Moreover, the circular is not binding on the ITAT;

++ the stand of the Revenue cannot be agreed that in the present year, assessment order has been passed u/s 144C, i.e. after reference to the DRP, and therefore the orders passed by the CIT(Appeals) and ITAT in favour of the petitioner in earlier years have lost significance and do not justify stay of demand in matters covered in favour of the assessee. Decisions of the CIT (Appeals) or the ITAT in favour of the assessee should not be ignored and have not become inconsequential. This is not a valid or good ground to ignore the decisions of the appellate authorities and is also not a good ground to not to stay demand or to allow adjustment u/s 245 of the Act. Revenue has not made out a good cause or reason why adjustment should allowed to recover demand on issues that have been decided in favour of the petitioner in other years;

++ the conduct and action of the respondent-Revenue in recovering the disputed tax in respect of additions to the extent of Rs.96 crores on issues which are already covered against them by the earlier orders of the ITAT or CIT (Appeals) is unjustified and contrary to law. Accordingly, directions are issued to the respondents to refund Rs.30 crores, which will be approximately the tax due on Rs 96 crores. The said refund shall be made within one month from the date when a copy of this order is made available to the respondents;

++ with regard to the interest u/s 234B and 234C recovered on the said Rs.30 crores, no direction for refund is being issued as the respondents have not recovered the full demand. The allegation of the petitioner that several other disputed additions are also covered by the earlier orders of the ITAT/CIT (Appeals) prima facie has merit but it is not possible to quantify and calculate the exact amount. The order passed by the ITAT substantially dismissing the stay application is not correct. One option available is that the ITAT should be asked to examine the said questions and decide the stay application afresh. However, the second option is preferred i.e. to direct the ITAT to hear the appeal filed by the petitioner expeditiously and preferably within a period of four months from the date copy of this order is served in their registry.

__._,_.___

Reply to sender | Reply to group | Reply via web post | Start a New Topic

Messages in this topic (1)

Recent Activity:

• New Members 4

Visit Your Group

This group is moderated by SHRI. BHUPENDRA SHAH, FCA, DISA(ICA)of Mumbai and DIPAK AGARWAL, FCA, DISA(ICA)of Guwahati. The opinion expressed here by any memebrs are of their own, and the user need to verify it from their own sources. No responsibility of any sort can be cast upon any members or the modertaor for any opinion expressed or the information posted on this group.

MARKETPLACE

Stay on top of your group activity without leaving the page you're on - Get the Yahoo! Toolbar now.

Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use

.

__,_._,___

Any loss arising from share trading business can be set off against profits of other business run by assessee

IT : Any loss arising from share trading business can be set off against profits of other business run by assessee

[2011] 13 taxmann 138 (Delhi)

HIGH COURT OF DELHI

Commissioner of Income-tax

v.

Gautam R. Chadha*

A.K. SIKRI AND M.L. MEHTA, JJ.

IT APPEAL NOS. 310 OF 2009, 1115 OF 2010

AND 358 OF 2011

JULY 27, 2011

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment year 2003-04 - Assessee was engaged in travel agency business under name and style of 'TTM' - It was representative of 'RCCL' and was responsible for marketing and selling its cruise all over world - As per agreement between assessee and 'RCCL', as and when ticket was booked and full payment was received, assessee was entitled to deduct its commission at 25 per cent and remit balance amount to 'RCCL' - In case of cancellation of trip, assessee was liable to return commission earned to RCCL and in that case, it could claim refund of tax from authorities - During relevant assessment year, assessee received certain amount in advance against booking of tickets by customers but did not consider same as income of year on ground that commission would be available to him only on qualified bookings, i.e., when cruise would depart - Whether, on facts, commission had accrued to assessee with booking of tickets and against full payment, notwithstanding that customer might not board cruise or cancel trip and, therefore, 25 per cent of booking advances should be treated as income of assessee for relevant assessment year - Held, yes [In favour of revenue]

Section 70 of the Income-tax Act, 1961 - Losses - Set off of from one source against income from another sources under same head of income - Assessment year 2003-04 - Whether where assessee was carrying on two business, i.e., travel agency business and share trading business, concurrently, he was entitled to set off loss in share trading business from profit of travel agency business - Held, yes [In favour of assessee]

FACTS

The assessee was engaged in business of travel agency under the name and style of TTM. TTM was the representative of 'RCCL' and responsible for marketing and selling its cruise all over the world. During assessment proceedings, the Assessing Officer noticed that the assessee had received money in advance against booking by customers in INR and USD during the relevant year but had not taken into account said amount as income of current year. The Assessing Officer observed that the assessee was receiving booking amount in nominal percentage and substantial money was being received before the sailing of cruise and upon receipt of full amount, the money was being remitted to RCCL after deducting commission at 25 per cent and if the customer cancelled the trip, the entire amount would get forfeited. Accordingly, the Assessing Officer added the whole amount of advance against booking into income of the assessee. During assessment proceedings, the Assessing Officer also noticed that some loss was incurred by the assessee on account of share transactions and same had been transferred to profit and loss account of 'TTM'. The Assessing Officer disallowed the claim of the assessee to set off said loss. On appeal, the Commissioner (Appeals) partly allowed the claim of the assessee by directing the Assessing Officer to treat 25 per cent of the booking advances as income of the assessee and give credit of 10 per cent on account of travel agents commission. He, however, confirmed the order of the Assessing Officer of not allowing the adjustment of losses in share transaction business to be set off against income from the business of travel agency. On second appeal, the Tribunal deleted the entire addition made by the Assessing Officer holding that the receipt by itself would not result into the income unless corresponding services had been performed. The Tribunal also allowed the assessee to adjust the loss from share transaction business against the profits of travel agency business holding that the assessee was carrying on two businesses concurrently as proprietor and, therefore, profits of one could be set off against loss of another in view of provisions of section 70.

On revenue's appeal :

HELD

Admittedly, the assessee was following mercantile system of accounting, wherunder whenever the right to receive money in the course of a trading transaction accrues or arises, even though income is not realized, income embedded in the receipt is deemed to arise or accrue. [Para 10]

The question for consideration in the instant case was as to when the income could be said to have accrued to the assessee. It was when the ticket was booked by the assessee or when the customer boarded the cruise and it departed. There was force in the contention of the revenue, that it was RCCL and not the assessee who was responsible to render all post booking services to the customers. As per agreement executed between the assessee and RCCL, all bookings which became sailed were made in accordance with RCCL's applicable policy and procedures and the bookings for which full payment was received by RCCL in accordance with the agreement were termed as qualified bookings. It also provided that bookings that were made by the customers on the Curise Line's website would not be considered as qualified bookings. As per the agreement, the assessee was required to remit for each booking to RCCL (a) quoted price or (b) the quoted process minus the commission payable to the assessee. The agreement prescribed 25 per cent as applicable base commission on individual and group bookings. From all this, it was seen that where full payment was received, the assessee was to remit to RCCL the quoted booking price minus 25 per cent base commission. The agreement also provided for the payment to the travel agents. It stated that all commission and other payments due and owing to the travel agent would be the sole responsibility of the assessee and not of RCCL. It also provided that the assessee would deduct and pay any such payments from his commission. That being so, as per the scheme of agreement, 10 per cent commission payable by the assessee to the travel agent from 25 per cent commission to be charged from RCCL was the sole responsibility of the assessee. Thus, as and when the ticket was booked and full payment was received, the assessee became entitled to deduct the commission of 25 per cent and remit the balance to RCCL. The commission accrued to the assessee with the booking of tickets and against full payment. This was notwithstanding that the customer might not board the cruise or cancel the trip. [Para 13]

There was a procedure prescribed for cancellation of bookings. As per agreement, the assessee would be liable to RCCL for payment of cancellation charges in accordance with the applicable cancellation charges schedule as might be amended from time-to-time. Assuming that in some cases, the assessee, in case of cancellation of trip, was liable to return the commission earned, it would be open for the assessee to seek adjustment or claim a refund of tax from the authorities. Therefore, the stand taken by the Commissioner (Appeals) in that regard was correct and 25 per cent of the booking advances received would be treated as income of the assessee assuming that there were no cancellations. However, the assessee would be entitled to 10 per cent credit on account of travel agents' commission after ascertaining actual outgoings in that regard. [Paras 14 and 15]

So far as loss in share trading business was concerned, admittedly, the assessee was doing share trading business although in his own name and not in the name of 'TTM'. The assessee was dealing in shares not for the purpose of investment but for the purpose of business. It is settled position of law that where shares are traded for the purpose of business, any loss arising therefrom will be considered as 'Business loss'. Hence, the Tribunal was right in holding that the assessee was entitled to set off the loss in share trading business from that of travel agency business. The case of the assessee came within the purview of section 70. [Para 19]

CASES REFERRED TO

CIT v. Shri Goverdhan Ltd. [1968] 69 ITR 675 (SC) (para 8), Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC) (para 8), Raja Mohan Raja Bahadur v. CIT AIR 1968 SC 114 (para 9), State Bank of Travancore v. CIT [1986] 24 Taxman 337 (SC) (para 9), Devsons (P.) Ltd. v. CIT [2010] 329 ITR 483/8 taxmann.com 87/[2011] 196 Taxman 21 (Delhi) (para 9), Amiantit International Holdings Ltd., In re [2010] 322 ITR 678/189 Taxman 149 (AAR - New Delhi) (para 9), CIT v. Dinesh Kumar Goel [2011] 331 ITR 10/197 Taxman 375/9 taxmann.com 188 (Delhi) (para 9), CIT v. P.M. Muthuraman Chettiar [1962] 44 ITR 710 (SC) (para 17) and CIT v. Ashoka Marketing Co. [1971] (III) UJ 895 (para 19).

Ms. Prem Lata Bansal and Deepak Anand for the Appellant. A.N. Hakser, Udyan Jain and Ashok Sikka for the Respondent.

JUDGMENT

M.L. Mehta, J. - These three appeals being ITA No. 310/09, 1115/10 and 358/11 are preferred against the orders passed by Income-tax Appellate Tribunal ('the Tribunal' for short) dated 22-8-2008, 17-6-2009 and 16-7-2010 relating to assessment years 2003-04, 2005-06 and 2007-08 respectively. Since the substantial questions of law in ITA 1115/10 and ITA 358/11 is also there in ITA 310/09, we propose to dispose of these three appeals through this common order, taking ITA 310/09 as the lead case.

2. Brief facts of the case are that the assessee was engaged in the business of travel agency under the name and style of M/s. Tirun Travel Marketing. It is the representative of M/s. Royal Caribbean Cruise Limited (hereinafter, 'RCCL' for short), responsible for marketing and selling Royal Caribbean and Celebrity Cruise all over the world. The respondent/assessee filed the return for assessment year 2003-04 declaring income at Rs. 79,59,400 on 20-11-2003.

3. On perusal of balance sheet as well as tax audit report, the Assessing Officer noticed that assessee had disclosed a sum of Rs. 1,44,76,873 as money received in advance against booking by customers in INR and USD. Though the said amount was received during the year, the same was not taken into account as income of the current year. The Assessing Officer observed that the assessee was receiving booking amount in nominal percentage, substantial money was being received before the sailing of cruise and upon receipt of full amount, the money was being remitted to RCCL after deducting commission at the rate of 25 per cent. He also observed that if the person did not want to sail and cancel the trip then the entire advance would get forfeited. Accordingly, Assessing Officer treated the entire amount of Rs. 1,44,76,873 as the income of the assessee.

4. During the assessment proceedings, the Assessing Officer further noticed that the assessee had incurred loss of Rs. 17,41,940 on account of share transaction and had transferred the loss to the Profit and Loss Account of M/s. Tirun Travel Marketing. On being asked to explain, the assessee filed details of trading of various shares in 18 different securities. No documentary evidence, however, was filed. Accordingly, the Assessing Officer treated the amount of Rs. 17,41,940 as capital loss and disallowed the claim.

5. Aggrieved by the order of Assessing Officer, the assessee went in appeal before the CIT(A) who partly allowed the appeal and held that the aggregate advances received by the assessee from the customers cannot be treated as profits in their entirety, however, it cannot be denied that the advances received may be inclusive of some element of profit which the appellant ultimately is entitled to receive. Accordingly, it directed the Assessing Officer to treat 25 per cent of the advances as income of the assessee and give credit of 10 per cent on account of travel agents commission after ascertaining actual outgoings in this regard. CIT(A) also confirmed the order of the Assessing Officer not allowing the adjustment of losses in share transaction business to be set off against income from the business of travel agency, holding that the accounts for each business have to be maintained separately and the loss from one activity cannot be set off against the income from the other.

6. Aggrieved by the order of CIT(A), the assessee again preferred appeal before the Tribunal. The Tribunal allowed the appeal and deleted the entire addition made by the Assessing Officer holding that the receipt by itself does not result into the income unless corresponding service have been performed. Either under cash system of accounting or mercantile system of accounting, the receipt becomes income only when the customer boards the cruise and it departs. The Tribunal also allowed the assessee to adjust the loss from share transaction business against the profits of travel agency business holding that the assessee was carrying on two businesses concurrently as Proprietor and therefore, profits of one can be set off against loss of another in view of provisions of section 70 of the Income-tax Act.

7. Against this order of the Tribunal, the revenue is in appeal before us. Following substantial questions of law arise in these appeals:

"(a) Whether the ITAT was correct in law in deleting the addition made by the Assessing Officer, which had been restricted by the CIT(A) to the extent of 15 per cent of the advances, treating the same as income of the assessee?

(b) Whether the receipts on account of booking of cruise tickets assumed character of income in the hands of the assessee when the amount was received from the customers or when the cruise departed?

(c) Whether the ITAT was correct in law in allowing the assessee to adjust the losses incurred on share transactions against the profit of commission agency business under the name and style of M/s. Tirun Travel Marketing?"

8. The learned counsel for the revenue contends that there was principal and agent relationship between RCCL and the assessee. It was RCCL who was liable to render the services and not the assessee. By booking the ticket, assessee created a legal relationship between RCCL and the customer who wanted to sail on cruise. As soon as the ticket was booked, agency came into existence and the assessee became entitled to commission. Assessee was liable to his principle only for booking of the tickets and to remit the entire amount of ticket. Even in case where the ticket was cancelled, assessee was entitled to commission thereon. Hence, the order of CIT(A) that the assessee was entitled to commission at the rate of 25 per cent was justified. In this regard, reliance is placed on the judgments of CIT v. Shri Goverdhan Ltd. [1968] 69 ITR 675 (SC) wherein it was held that, "It is well established that the income may accrue to an assessee without actual receipt of the same and if the assessee acquires a right to receive the same, the income can be said to have accrued to him though it may be received later on, on its being ascertained." and Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC) wherein it was observed that, "…once the income accrued, the fact that payment was deferred till after the accounts had been passed in the meetings of the managed company, did not affect the accrual of the income. Income accrues when it becomes due".

9. On the other hand, learned counsel for the assessee heavily relies on section 5 Article 2 of the Agreement which defines the term "Qualified Bookings" and lays down that qualified bookings are all F.I.T. and group bookings which become sailed booking, which were made in accordance with RCCL's applicable policies and procedures, and for which full payment is received by RCCL. Learned counsel for the assessee contends that the commission for such bookings is available to the assessee only on qualified bookings. The assessee has no right to receive any commission on the advance amounts received for the bookings in case the cruise doesn't depart. The advance doesn't on its own become revenue for the assessee till the booking becomes a sailed booking and full payment is received by the RCCL. Once the sail takes place and commission accrues to the assessee, he offers his income for taxes. Taxing the advance received considering it as income will also lead to double taxation since the assessee offers the final income for taxation in the subsequent years. In this regard, he relies upon the judgments of Raja Mohan Raja Bahadur v. CIT AIR 1968 SC 114, State Bank of Travancore v. CIT [1986] 24 Taxman 337 (SC), Devsons (P.) Ltd. v. CIT [2010] 329 ITR 483/8 taxmann.com 87/[2011] 196 Taxman 21 (Delhi), Amiantit International Holdings Ltd., In re [2010] 322 ITR 678/189 Taxman 149 (AAR - New Delhi), CIT v. Dinesh Kumar Goel [2011] 331 ITR 10/197 Taxman 375/9 taxmann.com 188 (Delhi).

10. Admittedly, the assessee is following mercantile system of accounting, whereunder, whenever the right to receive money in the course of a trading transaction accrues or arises, even though income is not realized, income embedded in the receipt is deemed to arise or accrue as held by the SC in Raja Mohan Raja Bahadur's case (supra). In State Bank of Travancore's case (supra) also, the SC has held that it is the income which has really accrued or arisen which is taxable. Similar view has been expressed by this court in Devsons (P.) Ltd.'s case (supra). It was observed as under:

"… Even in the mercantile system of accounting it is the real income which has accrued in a practical sense that is to be brought to tax. In CIT v. Shoorji Vallabhdas & Co. [1959] 36 ITR 25, the Bombay High Court held that the question whether the income accrued or not is not a mere matter of cogency of the entries made in the account books of the assessee, but is essentially one of substance and of the real nature of what happened. A mere book entry is not conclusive of the question whether the assessee had become entitled to the sums or not and whether the income is accessable"

11. In Amiantit International Holdings Ltd.'s case (supra), it was observed as under:

"We shall now look to the meaning of the expression "accrue or arise". The dicta of Mukherji, in Rogers Pyatt SI IIac and Co. v. Secretary of State for India [1925] 1 ITR 363 has been quoted with approval in a series of decisions of the Supreme Court (vide E.D. Sassoon and Co. Ltd. v. CIT [1954] 26 ITR 27 (page 50):

"Now what is income? The term is nowhere defined in the Act…. In the absence of a statutory definition we must take its ordinary dictionary meaning…. The word clearly implies the idea of receipt, actual or constructive. The Policy of the Act is to make the amount taxable when it is paid or received either actually or constructively. 'Accrues', 'arises' and 'is received' are three distinct items. So far as receiving of income is concerned, there can be no difficulty; it conveys a clear and definite meaning, and I can think of no expression which makes its meaning planner than the word 'receiving' itself. The words 'accrue' and 'arise' also are not defined in the Act. The ordinary dictionary meanings of these words have got to be taken as the meanings attaching to them. 'Accruing' is synonymous with 'arising' in the sense springing as a natural growth or result. The three expressions 'accrues', 'arises' and 'is received' having been used in the section, strictly speaking, 'accrues' should not be taken as synonymous with 'arises' but in the distinct sense of growing up by way of addition or increase or as a accession or advantage, while the word 'arises' means comes into existence or notice or presents itself. The former connotes the idea of growth or accumulation and the latter of the growth or accumulation with a tangible shape so as to be receivable."

12. In Dinesh Kumar Goel's case (supra), it was observed as under:

"….It is important, therefore, that receipt of a particular amount in the relevant year should be an 'income' under the aforesaid provision. What is the relevant yardstick is the time of accrual or arisal for the purpose of its taxation, viz., in order to be chargeable, the income should accrue or arise to the assessee during the previous year. If income has accrued or arisen, even if actual receipt of the amount is not there, it would be chargeable to tax in the said year. Though the amount may be received later in the succeeding year, the income would be said to accrue or arise if there is a debt owned to the assessee by somebody at that moment. From this, it follows that there must be the "right to receive the income on a particular date". The court further explained that a right to receive a particular sum under the agreement would not be sufficient unless the right accrued by rendering of services and not by promoting for services and where the right to receive is anterior to rendering of service, the income, therefore, would accrue on rendering of services…. (para 13)"

13. The question for our consideration is as to when the income can be said to be accrued to the assessee. It is when the ticket is booked by the assessee or when the customer boarded the cruise and it departed? We find force in the contention of the learned counsel for the revenue, that it was RCCL and not the assessee who was responsible to render all post booking services to the customers. As per section 5 of Article (2) of 2002 International Representation Agreement as executed between the Assessee and RCCL, all bookings which become sailed which were made in accordance with RCCL's applicable policy and procedures and for which full payment is received by RCCL in accordance with this agreement are termed as qualified bookings. It also provides that bookings that are made by the customers on the Cruise Line's website shall not be considered qualified bookings. As per section 16 thereof, the assessee was required to remit for each booking to RCCL (a) quoted price or (b) the quoted prices minus the commission payable to the assessee pursuant to section 6. Section 6 prescribed base commission which is payable by RCCL to the assessee on the bookings. It prescribes 25 per cent as applicable base commission on individual and group bookings. From all this, it is seen that where full payment is received, the latter is to remit to RCCL the quoted booking price minus 25 per cent base commission. Section 12 provides the payment to the travel agents. It states that all commission and other payments due and owing the travel agent, shall be the sole responsibility of the assessee and not RCCL. It also provides that assessee shall deduct and pay any such commissions and payments from the commission. That being so, as per the scheme of agreement, 10 per cent commission payable by the assessee to the travel agent from 25 per cent commission to be charged from RCCL, was the sole responsibility of the assessee. Thus, as and when the ticket is booked and full payment is received, the assessee becomes entitled to deduct the commission of 25 per cent and remit the balance to RCCL. The commission accrues to the assessee with the booking of tickets and against full payment. This is notwithstanding that the customer may not board the cruise or cancel the trip.

14. There is a procedure prescribed for cancellation of bookings. Section 20 of the Agreement provides for cancellation charges. This section reads as under:

"20. Cancellation Charges.—IR acknowledges that RCCL suffers injury when (i) bookings are cancelled but RCCL does not receive proper notice, or (ii) bookings are cancelled close to the scheduled departure. IR shall be liable to RCCL for payment of cancellation charges in accordance with RCCL's applicable cancellation charge schedule as may be amended from time to time. The current cancellation charges for individual bookings are set forth in Exhibit B and for group bookings in Exhibit A. These cancellation charges are subject to the following rules:

(a) RCCL reserves the right to change cancellation charges and time frames upon written notice to IR.

(b) RCCL does not take responsibility for cancellations due to visa denials, incorrect documents, incorrect immigration forms, or absence of insurance.

15. As per this section, the assessee shall be liable to RCCL for payment of cancellation charges in accordance with the applicable cancellation charges schedule as may be amended from time to time. Assuming that in some cases, the assessee, in case of cancellation of trip, is liable to return the commission earned, it would be open for the assessee to seek adjustment or claim a refund of tax from the Authorities. We therefore, hold that the stand taken by the CIT(A) in this regard was correct and 25 per cent of the booking advances received should be treated as income of the assessee assuming that there are no cancellations. However, the assessee shall be entitled to 10 per cent credit on account of travel agents commission after ascertaining actual outgoings in this regard.

16. The learned counsel for the revenue further contends that the Assessing Officer had treated the loss from share trading business as "Capital Loss" since the assessee had not furnished any details i.e., contact notes, mode of payments, details of shares etc. No specific finding has been given by the CIT(A) as to whether loss incurred and claimed by the assessee was a business loss or a capital loss. ITAT could not have outrightly treated the loss as business loss, and the provisions of section 70 could not have been applied.

17. In this regard learned counsel for the assessee contends that the disallowance was on the basis that the entire account of share business is in the name of Gautam Chaddha and not in the name of M/s. Tirun Travel Marketing. The Assessing Officer while doing so disregarded the provision of section 70 of the Act and the fact that travel business is nothing but the proprietorship concern of Mr. Gautam Chadha. He further contends that the loss incurred from share transaction business was assessed under the head 'Business Income' by the Assessing Officer and confirmed by the CIT(A) as well as by the Tribunal. Once it is held to be business loss, provisions of section 70 of the Act will apply. In this regard, he relies upon the judgment of CIT v. P. M. Muthuraman Chettiar [1962] 44 ITR 710 (SC).

18. In P. M. Muthuraman Chettiar's case (supra), the Hon'ble SC has observed as under:

"……It is worthy of note that though the profits of each distinct business may have to be computed separately, the tax is chargeable under section 10, not on the separate income of every distinct business, but on the aggregate of the profits of all the businesses carried on by the assessee. It follows from this that where the assessee carried on several businesses, he is entitled under section 10, and not under section 24(1), to set off losses in one business against profits in another……."

19. Admittedly, the assessee was doing share trading business although in his own name and not in the name of M/s. Titun Travel Market. The assessee was dealing in shares not for the purpose of investment but for the purpose of business. It is settled position of law that where shares are traded for the purpose of business, any loss arising therefrom will be considered as "Business Loss". [CIT v. Ashoka Marketing Co. 1971 (III) UJ 895]. Hence, we are of the view that the Tribunal was right in holding that the assessee is entitled to set off the loss in share trading business from that of travel agency business. The case of the assessee comes within the purview of section 70 of the Act. Accordingly, this issue is decided in favour of assessee and against the revenue.

20. In view of our foregoing discussion, we answer the Question (a) in negative in favour of revenue and against the assessee and Question (b) in affirmative in favour of the revenue and against the assessee. The Question (c) stands answered in affirmative in favour of the assessee and against the revenue.

21. All the above appeals stand disposed of.

Delhi High Court: Search Assessment u/s 153A Does Not Require Issue of Notice U/s 143(2)

Issue of notice u/s 143(2) before passing search assessment order has been controversial issue . This is for simple reason that  no clear provision regarding issue of notice has been given in the Income T Act in case of search proceeding u/s 153A . Therefore, among many grounds on which counsel for assessee challenge order by A.O u/s 153A is issuance of notice u/s 143(2).

Notice in Search Case u/s 153A

In recent past , Tribunals have given verdict that in case of search proceeding u/s 153A also , the notice u/s 143(2) is necessary . In fact , ITAT, Agra , in its order dt 30/11/2010 in case of Narendra Singh vs ITO 138 TTJ 615 held that notice u/s 143(2) is mandatory in case of search case u/s 153A.
However, Delhi High Court in a very recent judgment in case of Ashok Chadha vs CIT held that the notice u/s 143(2) is not mandatory for search assessment u/s 153A.
Search case issue before Delhi High Court

"(a) Whether the issue of notice under Section 143(2) of the Income Tax Act is mandatory for finalization of assessment under Section 153A? (b) Whether the findings of the authorities below upholding addition of Rs.10 lac of cash seized from Mr. D.S. Rawat in the hands of the Assessee was perverse and required to be set aside? "

The Court held on the issue of notice u/s 143(2) in case of search assessment u/s 153A as under

11. It is also to be noted that Section 153A provides for the procedure for assessment in case of search or requisition. Sub section (1) starts with non-obstante clause stating that it was 'notwithstanding? anything contained in sections 147, 148 and 149, etc. Clause(a) thereof provides for issuance of notice to the person searched under Section 132 or where documents etc are requisitioned under Section 132(A), to furnish a return of income. This clause nowhere prescribes for issuance of notice under Section 143(2). Learned counsel for the assessee/appellant sought to contend that the words, "so far as may be applicable" made it mandatory for issuance of notice under Section 143(2) since the return filed in response to notice under Section 153A was to be treated as one under Section 139. Learned counsel relies upon R. Dalmia v CIT (supra) wherein the question of issue of notice under Section 143(2) was examined with reference to Section 148 by the Supreme Court in the context of Section 147. The Apex Court held as under:
"As to the argument based upon Sections 144-A, 246 and 263, we do not doubt that assessments under Section 143 and assessments and reassessments under Section 147 are different, but in making assessment and re-assessments under Section 147 the procedure laid down in Sections subsequent to Section 139, including that laid down by Section 144B, has to be followed."
12. The case of R. Dalmia v CIT (supra) primarily was with regard to applicability of section 144B and Section 153 (since omitted with effect from 01.04.1989) to the assessment made under section 147 and 148 and thus cannot be said to be the decision laying down the law regarding mandatory issue of notice under Section 143(2).
13. The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section 143(2) was mandatory in case of assessment under Section 153A. The use of the words, "so far as may be" cannot be stretched to the extent of mandatory issue of notice under Section 143(2). As is noted, a specific notice was required to be issued under Clause (a) of sub-section (1) of Section 153A calling upon the persons searched or requisitioned to file return. That being so, no further notice under Section 143(2) could be contemplated for assessment under Section 153A.
14. No specific notice was required under section 143(2) of the Act when the notice in the present case as required under Section 153 (A) (1) (a) of the Act was already given. In addition, the two questionnaires issued to the assessee were sufficient so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him.

In nutshell, the controversy regarding the issue of notice u/s 143(2) in case of search assessment u/s 153A has been set to rest by Hon'ble Delhi High Court.

When assessee transfers brand, trademark and other interests in a

Whether when assessee transfers brand, trademark and other interests in a health periodical, held as intangible assets, profits arising out of such transactions are to be treated as capital gains or business income - capital gains, says HC

THE issue before the HC is - Whether when assessee transfers brands, trademark and interests in a health periodical, held as intangible assets, the profit arising out of such transaction is to be treated as capital gains or business income. The HC's answer is capital gains.

Facts of the case

Assessee is a private limited company engaged in the business of Healthcare, print media & electronic media communications – it entered into an 'Specified Assets Transfer Agreement' with one `CMPIPL' for the sale of all its rights, titles and interest in specified assets of its Healthcare Journals & Communications business for a consideration of Rs. 3.80 crores – these assets were (a) the periodicals (b) the products (c) the business intellectual property rights along with the goodwill and all rights (d) the customer database (e) the records (f) the editorial materials & (g) the contracts – pursuant to the agreement, two separate deeds namely 'Deed of Assignment of Copyrights' & 'Deed of Assignment of Trademarks' were executed on the same date and the assessee also assigned the copyrights and trademarks pertaining to its Healthcare Journals & Communication business – it also relinquished its right to carry on any business involving, relating to or competing with the transferred specified assets – however, it retained a limited & non exclusive right to use the pharmaceuticals companies solely for the purpose of its clinical trials business and for no other purpose – assessee offered the said amount as long term capital gain – In assessment proceedings, the assessee submitted that all the journals were initiated by the company itself and were not in existence earlier, these journals were registered with the Registrar of Newspapers of India - thus, the assessee was the owner of brand name of these journals which were also registered/indexed with Indian National Scientific Documentation Centre, Govt. of India and was the exclusive holder of copyrights and trademarks of all the journals – these were intangible assets u/s 55(2)(a), the cost of acquisition of which was `Nil' and the consideration received should be considered as long term capital gain.

AO observed as per the terms of the agreement that the assessee had not sold whole of its business but only surrendered it right regarding publications of journals and the `CMPIPL' granted the assessee a royalty free, non-exclusive license to use the data comprised of the advertisers and pharmaceutical companies which the assessee would use in respect of its clinical trials business. The agreement also contained a non compete clause. Thus, the AO considered that the income received would be treated as business income as per the provisions of Section 28 (va).

CIT (A) as well as ITAT allowed the appeal of the assessee and treated it as capital gain. ITAT held that the assessee company had wholly given up its right to carry on Healthcare Journals and Communications business for a specified period and there was no connection between the two businesses i.e. Business of Healthcare Journals & Communications was clearly a distinct and separate business as before sale of intangible like trademarks, brands, copyrights and goodwill. The assessee had lost the source of income and section 28(va) did not apply.

After hearing both the parties, the ITAT held that,

++ it is to be borne in mind that vide agreement entered into by the assessee in favour of M/s CMP Medica Pvt. Ltd, the assessee had sold/transferred the rights of trade mark, brands, copyrights etc. in the journals and publications which the assessee had. All the journals were registered with RNI. These publications were indexed by the INSDC and were also published as property of the assessee. The assessee also had copyrights therein. It cannot be disputed that trademarks/brands, copyright and good will constitute assets of the business and are profit earning apparatus. The 'right to carry on any business' has been recognized by the legislature as capital asset for the purposes of assessing and computing the capital gains as per Section 55 (2) (a). Once it is accepted that the brand names, trademark, copyright and goodwill in the aforesaid journals was sold/transfered by the assessee to the transferee, it would be a case of sale of capital asset and the gain therefrom would be computed as capital gain;

++ the assessee had sold and transferred permanently and forever all its existing assets and contracts of the Healthcare journals and Communication business in terms of the agreement. The consideration was not received only for giving up the right to carry on the Healthcare Journals & Communications business but was mainly for the transfer of all intangible assets being trademarks, brands, copyrights and the associated goodwill of the Healthcare journals & communications business. In respect of journals etc. published, the assessee had Statutory Title Clearance from the office of the Registrar of Newspapers for India, all the publications were registered with RNI, appellant had also filed "from B' declaration before the DCP (Licensing), Delhi, the publications were indexed by INSDOC and all these publications had a copyright declaration which proves the authenticity of the appellant's claim of the assets being in the nature of intangible capital assets of business;

++ the clinical trial business which the assessee continues to carry on was distinct and separate from the business of Healthcare Journals and Communication. As far as Healthcare Journal and Communication business is concerned, it had been given up in entirety in favour of the transferee. Therefore, it could not be said that the assessee had given up only one of the activities in relation to its business. Thus, the proviso to Section 28(va) becomes applicable which stipulates that Section 28 (va) was not applied to any sum received on account of transfer of right to carry on any business which is chargeable under the head "capital gains";

++ further the agreement was captioned as "Specified Asset Transfer Agreement" which defines "Business" to mean the business of publishing, distributing and selling the periodical and products as carried on by the seller. All these publications were termed as "Business Intellectual Property Rights" which were treated as "Specified assets". So much so, the "Customer Data Base" held by the assessee was also shared with the transferee. Thus, there was a clear transfer of the exclusive assets and on transfer it is the transferee who had become the sole and undisputed owner of these assets which were the business assets of the assessee.

Whether when donor has capacity to borrow funds, not based only on annual

Whether when donor has capacity to borrow funds, not based only on annual income but also total assets owned, genuineness of gift cannot be doubted - Delhi HC grants major relief to Mayawati

NEW DELHI: THE questions before the Bench are - Whether when donor has the capacity to borrow funds, not based only on annual income but also the total assets owned, the genuineness of gift cannot be suspected and whether a gift is to be treated as genuine when the assessee discharges the onus cast on it for proving the identity, creditworthiness and relationship of the donor and the donee. And the verdict goes in favour of the assessee.

Facts of the case

The Income Tax return for the Assessment Year 2003-04 was filed by the assessee on 06.08.2003 declaring total income of Rs.13,29,090/-. The Assessee earned income from salary, house property and other sources. The AO, on perusal of the return, found that during the year under consideration, the assessee had received gifts from the certain persons vide cheques and also received immovable assets from Ashok Jain and Veena who were the husband and wife. Pankaj Jain, from whom the assessee received the cheque of Rs. 200000/- was nephew of Ashok Jain. Ashok Jain was an Advocate by profession and Pankaj was a practicing Chartered Accountant and a partner of M/s P.Jain & Co.

The AO wanted to examine the genuineness of the aforesaid gifts. For this purpose he summoned the donors. He recorded the statement of Veena Jain on 26.12.2004. The AO recorded his observation on the creditworthiness, it was seen that she herself had taken loan for purchase of property as she was not having sufficient funds for this purpose. She had sold her jewellery for purchase of the house. Therefore, he opined that the creditworthiness of the donor was not proved.

Summons u/s 131 of the Act was issued to Ashok Jain. In compliance, Ashok Jain, Advocate appeared before the AO and his statement was recorded by him. The AO observed that there was no relation between the donor and the donee and the genuineness and creditworthiness was not proved.

The AO also recorded the statement of Pankaj Jain. After going through the facts, he found that during the Assessment Year 2003-04 he had gifted a sum of Rs.17 lacs to her and the family members of the assessee. He had also made gift of Rs.2 lacs in the Assessment Year 2000-01 and in the Assessment Year 2004-05 made a gift of Rs.5 lacs to the assessee. As observed by the Assessment Officer that the entire case made by him was out of amount received from M/s Blue Bell Finance Co.

The AO recorded in his assessment order that it was surprising that the assessee had gifted the amount out of loan taken from this concern M/s Blue Bell Finance Co. Since there was no occasion for making the gift; the gifted amount was more than the income of the assessee; that there was no relation between the donor and the donee, and the AO held that it was only an arranged gift and an accommodation entry.

In nutshell the AO did not accept the claim of the assessee in respect of the two immovable properties namely C-57, Inderpuri, New Delhi and C-58, Inderpuri, New Delhi and added the same to the income of the assessee u/s 69 of the Act. He also did not accept the gift of Rs.2.00 lac of Pankaj Jain and made addition of this amount also to the income of the assessee u/s 69 of the Act. In the final assessment order dated 30.03.2006, total income of the assessee was assessed at Rs.79,03,390/-.

The assessee preferred an appeal against the above order passed by the AO. As regards applicability of Section 69, the CIT (A) was of the opinion that it was not the assessee who had made the investment. The donor had paid the stamp duty twice, the assessment of the donor had not been disturbed, and the donor and donee both accepted the factum of gift. Further the gift was also evidenced by documentary evidences like gift deeds, sworn affidavits, declaration before AO etc. The donor also gave an explanation for immediate source of gift. Therefore, keeping the aforesaid discussion into view the CIT (Appeal) was of the opinion that the donee had discharged not only the burden but also the onus cast on her. Accordingly, the addition of Rs. 40,68,450/- was deleted.

As regards the gift of property No. C-58, Inderpuri, the CIT(A) did not agree with the assessment order passed by the AO and addition made by the AO of Rs.22,03,850/- was deleted. The basis of this conclusion were almost as in the case of gift made by her husband Ashok Jain regarding the property No. C-57, by Ashok Jain.

As regards the gift of Rs. 2 lacs received by the assessee from Pankaj Jain by provision he was a Chartered Accountant and assessed to tax since last so many years. The CIT (A) found that he had placed details of his income tax assessment and bank account and also filed affidavit certifying the above gift. He appeared before the AO for statement on oath where he confirmed giving the gift. He also established that he had been meeting the assessee, and his family members on family functions since so many years. The CIT (A) also found that the gift vide A-C payee cheque no. 17186 dated 17.12.2002 drawn on Andhra Bank for Rs. 2 lacs.

The CIT (Appeal), thus, accepted the genuineness of gift inasmuch as the identity and capacity of the donors were proved and came to the conclusion that factum of gift stood established. He thus, partly allowed the appeal of the assessee. The ITAT confirmed the order of the CIT(A).

On further appeal, the High Court held that,

++ there is substance in the contention of the counsel for assessee that there are pure findings of facts recorded by the two authorities below on the basis of evidence adduced which was sufficient to discharge the onus as well as burden caused upon her by proving the identity of donors, their creditworthiness as well as genuineness of the gifts. It has been established that the assets of Ashok Jain as on 31.03.2003 including movable/ immovable assets were of Rs.1.25 crores, whereas the liability owned by Ashok Jain was only Rs.11.88 lacs less Rs.10.78 lacs. Keeping the assets owned by Ashok Jain, the court was of the considered view that he had the capacity to make gifts in question. Therefore, there is no force in the arguments of the ASG that Ashok Jain had no capacity to do the same;

++ further in the case of Veena Jain, details of assets proved on record show that the total assets of Veena Jain were of Rs.1.34 crores & the liabilities were only of Rs.2.11 lacs. We have perused the assets owned by Mrs.Veena Jain and found that she had capacity to borrow first, and then to gift as per her desire. The capacity does not mean what you are earning monthly or annually. The capacity includes how much total assets a person owns. So is the case of Veena Jain here, she had an asset of Rs.1.34 crores, definitely could borrow Rs.20 or 25 lacs easily. Second plea regarding Veena Jain is that if a person buys any property for her personal use, she will definitely not make the gift for the same. Here on perusal of the record it is revealed that she has stated before the Department that the assessee is a Rakhi sister of her husband and she is great admirer of the assessee because she is working for the upliftment of the down trodden and poor persons of the society. Sometimes a person does not have to be related to a particular trust or a charitable institution, but in their view that trust or institution is doing a great service to the particular section of the society. Therefore, there is no force in the arguments advanced by the counsel for the Revenue. Further, it is also not necessary that a person should be a habitual donor. It depends from person to person, thinking to thinking and situation to situation. Sometimes a person keeps donating throughout their life and sometimes he donates once and sometimes during the last stage of his life. Therefore, the arguments advanced by the counsel for the Revenue cannot be agreed with;

++ counsel for the Assessee has vehemently argued that the Revenue has relied upon the judgments not relevant in the facts and circumstances of the instant case. In the case of Sajan Dass and Sons vs. Commissioner of Income-Tax, the donor was not found related to the assessee, however, in the present case the donors have 15 years old relationship with the assessee as has been proved by the evidence, affidavits on oath and photographs. Therefore, the aforesaid case does not hold for the Revenue Department;

++ another case of Anil Kumar (2007-TIOL-210-HC-DEL-IT) has also no relevance because in the said case the assessee was asked to explain the capacity and genuineness of the donor, however, the assessee did not appear before the Department. But, in the present case the assessee herself submitted all the relevant documents before the Revenue. That apart, all the donors appeared, confirmed and filed affidavits on oath. Therefore, this case of Anil Kumar is not relevant in the present situation;

++ so is the case of Rajeev Tandon (2007-TIOL-413-HC-DEL-IT) wherein, the donor was complete stranger, but in the present case all the donors have 15 years old relationship with the assessee as has been proved by evidence, documents and their statements;

++ all the donors appeared before the Department, submitted material including affidavits on oath, confirms the gifts made, established their old relations with the assessee and proved their capacity to make the gifts. We have noted that in earlier years also they had made gifts to the assessee and her family members, which were accepted by the Revenue. We have also noted that two gifts made by Ajay Aggarwal and O.P.Khadaria, Advocate were of Rs.10 lacs and Rs.1 lac respectively have been accepted by the Department. The donors are persons of sufficient means. The assessee has fully discharged her legal obligations by disclosing the identity of all the donors. Further, donors have proved their genuineness and capacity to make a gift. All assessee as well as the donors had appeared before the Registrar and the gifts are duly registered. All gifts are absolute and without any lien of anyone. There is no evidence on record to prove that the assessee has favoured the donor in any manner whatsoever by acquiring the gifts in question. The capacity of any person does not mean how much they earn monthly or annually, but the term capacity has vided term and that can be perceived by how wealthy he is. All the formalities, as per law are met by the assessee and donors as well. All the donors have admitted that they are great admirer of the assessee as she is working for the upliftment of poor people;

++ the issue raised by the Revenue in the instant appeal cannot be said to involve any question of law, much less a substantial question of law. A question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse, as was held in the case of Mahavir Woolen Mills;

++ in the light of above facts and circumstances, no substantial question of law arises from the instant appeal. Therefore, the judgment passed by the ITAT was confirmed and the instant appeal of the Revenue was dismissed.

HC DEL : Sections 132(5), 143(3), 234A, 234B, 234C

Subject: Assessing Officers' Forum:- Income tax – Sections 132(5), 143(3), 234A, 234B, 234C – Whether the interest u/s 234A, 234B, 234C & 220(2) is rightly levied on the demand for various years when the department is having huge deposit on account of the assessee

2011-TIOL-410-HC-DEL-IT

IN THE HIGH COURT OF DELHI

W.P. (C) No.21428 of 2005

VISHWANATH KHANNA

Vs

UNION OF INDIA & OTHERS

A K Sikri and M L Mehta, JJ

Dated: June 03, 2011

Appellant Rep by: Mr. C S Gupta, Adv
Respondent Rep by: Mr. Sanjeev Sabharwal, Sr. Standing Counsel

Income tax – Sections 132(5), 143(3), 234A, 234B, 234C – Whether the interest u/s 234A, 234B, 234C & 220(2) is rightly levied on the demand for various years when the department is having huge deposit on account of the assessee in PD account and the assessee repeatedly requested to adjust the said amount against the demand – Whether the assessee is entitled to interest on the deposit with the department u/s 132D from the end of 120 days from the date on which the last of the authorizations for search under Section 132 or requisition under Section 132A and not from the date when the amount was transferred into the account of AO from P.D. Account.

Assessee is a proprietor of ‘F’, started in the year 1993 to trade in gold, silver and bullion – a search and seizure action was conducted whereby cash and silver were restrained initially but subsequently seized – ACIT, investigation circle passed order u/s 132(5) that the cash found during search as unexplained was retained and not released. Subsequently, vide another order u/s 132(5), various disputed additions were made and tax and penalty @200% was levied - the entire silver seized was retained and was not released.

The department disputed the status of the concern as it was an unregistered partnership firm and intended to tax it as firm. AO made assessment u/s 143(3) in the name of ‘F’ after making additions on protective basis. In appeal before CIT (A), partly additions were deleted and partly confirmed. Before the protective assessment orders were passed in the case of ‘F’, assessee approached the department to allow him to sell the seized silver after deposing the amount of equal value. As no heed was paid to this request, the assessee filed Writ Petition and the Court directed the department to release seized silver after depositing rotational deposits of Rs.50 lacs or equal amount of silver to be released. Accordingly the entire silver was released against total payment of Rs.4,20,50,000/- deposited by the petitioner from time to time on the sale of released silver.

After various orders / developments, against the deposit of Rs.4,70,36,500/- lying with the Department, liability of the assessee was ascertained to Rs.17,22,608/- and thus, he was entitled to refund of the balance amount along with interest.

Assessee approached the Settlement Commission u/s 245C to determine his income. The application was admitted. According to the assessee, the amount deposited with the department was much more than the tax liability and therefore, he had been making request for refund of the same and till it was refunded, to keep the same in the fixed deposit bearing interest. That was not done. The assessee was supposed to file the income tax return for the successive years. Assessee was required to pay the advance tax due and payable in respect of these income tax returns. Since he was facing cash flow problems in his business and there was sufficient surplus money lying with the Department which belonged to the petitioner, he made request for adjusting the advance tax payable out of the aforesaid amount lying with the Department. These requests of the assessee remained unattended. However, AO while passing the assessment order imposed interest u/s 234B, 234C and 220 of the Act for making deposit of advance tax.

The Settlement Commission finally disposed of settlement application and the income of the assessee was determined. After this order was passed, the assessee again requested for release of the amount as the final tax payable was only Rs.17.22 lacs - Assessee approached various authorities in this behalf including the ITO, CBDT, Commissioner of Income Tax, etc. However, no action was taken.

Insofar as interest payable to the assessee on the deposit, the department calculated the same w.e.f the date when the amount transferred into the account of PD account. Assessee contended that he was entitled to interest u/s 132B at least till the time order is passed by the Income Tax Settlement Commission. The claim of the assessee was that u/s 132B of the Act, he was entitled to interest after six months from the date of order passed under Section 132(5) of the Act on initial seized amount minus tax due/payable and on further deposits in P.D. Account from the date of such deposit.

The issues raised by the assessee were (i) Whether interest u/s 234A, 234B, 234C and 220 (2) of the Act could be charged when according to the assessee, sufficient amount of the assessee was lying deposited with the Department wherever advance tax could be adjusted? (ii) From which date the assessee is entitled to interest on the amount which became refundable after giving effect to the orders passed by the Income Tax Settlement Commission?

Assessee contended that no interest could be charged for non-payment of advance tax as there was sufficient amount already lying with the Department. Revenue contended that it was not permissible for the assessee to seek adjustment from the amount lying with the Department, which in fact belonged to ‘F’ which was assessed as unregistered partnership and not as the sole proprietorship of the assessee. There was a dispute about the amounts seized and/or rotational payments either belonged to ‘F’ or the assessee in his personal capacity which was settled u/s 245D(4) by the Income Tax Settlement Commission vide its order dated 07.07.2003. Hence, no amount was available for adjustment of the demands raised in the case of assessee upto 07.07.2003.

After hearing both the parties, the High Court held that,

++ no doubt, ‘F’ was assessed as unregistered partnership. However, the assessee was clamouring that it was his sole proprietorship concern and had submitted proofs in respect thereof. If the plea of the assessee was not accepted erroneously by the Department, it cannot take advantage of its own wrong. Ultimately, the assessee was vindicated when the Settlement Commission accepted that he was the sole proprietor of ‘F’. The arguments of the department that it is only on 07.07.2003 when the Settlement Commission passed the orders u/s 245D(4) of the Act that the amount became available to the petitioner, is without any substance. The request of the assessee to adjust the advance tax from the amount lying deposited with the Department in the accounts of ‘F’ was justified, which was unnecessarily turned down by the Department. Therefore, the revenue would not be justified in levying interest, as the amount of advance tax payable by the assessee for these assessment years could be adjusted from the amount lying with the Department in the assessee's own account;

++ insofar as the assessee's entitlement to interest on the amount which became refundable after giving effect to the orders passed by the Settlement Commission, it cannot be disputed that the assessee is entitled to interest on such an amount u/s 132D(4) of the Act. This provision clearly mandates the Central Government to pay simple interest @ 1 ½ % for every month on amount by which the credit money seized under Section 132, etc. of the Act. Clause (b) sub-Section (4) of Section 132B of the Act stipulates that such interest shall run from the date immediately following the expiry of the period of 120 days from the date on which the last of the authorizations for search under Section 132 or requisition under Section 132A was executed to the date of completion of the assessment. In accordance with this provision, from the date of search and seizure of the gold, 120 days would be calculated and from the expiry of this period, the interest shall become payable. In the present case, even after giving effect to the orders of the Settlement Commission, the excess amount was not refunded to the petitioner. The assessee has demanded interest u/s 132A of the Act and would be entitled to interest u/s 244A of the Act from the date of amount transferred into the account of AO from PD account after adjusting the tax due/payable.

Assessee’s appeal allowed

JUDGEMENT

Per: A K Sikri:

1. The petitioner is a proprietor of M/s Foto Traders, a firm started in the year 1993 to trade in gold, silver and bullion. Income Tax Department conducted a search and seizure operations on 04.02.1995 whereby cash and silver were restrained initially but subsequently seized as under:

Cash : Rs. 49,86,500/-

Silver : 222 bars of total weight 70003.859Kgs. Having market value estimated at Rs.4,44,66,395/- by the Income Tax Department.

2. The Assistant Commissioner of Income Tax, Investigation Circle (20)(1), New Delhi passed order under Section 132(5) of the Income Tax Act (hereinafter referred to as 'the Act') dated 02.06.1995 declaring that cash found during search as unexplained and hence, cash seized of Rs.49,86,500/- was retained and not released. Subsequently, vide another order under Section 132(5) dated 19.06.2005, various disputed additions were made and tax and penalty @200% were raised. Therefore, entire silver seized valuing Rs.4,44,66,395/- was retained and not released. We may mention at this state that the Income Tax Department disputed the status of M/s Foto Traders, as according to it, it was an unregistered partnership firm. Therefore, the Department intended to tax income in the hands of this firm. The concerned Assessing Officer (AO) passed the assessment order under Section 143(3) in the name of M/s Foto Traders after making huge additions of Rs.10,49,53,527/- on protective basis. In the appeal filed against the said order, additions of Rs.6,32,84,274/- were deleted and rest additions were confirmed. We may also mention at this stage that in the meantime and before the aforesaid protective assessment orders were passed in the case of M/s Foto Traders, the petitioner had approached the Department to allow him to sell the seized silver after deposing the amount of equal value. As no heed was paid to this request, the petitioner filed Writ Petition (Civil) No.4767/1998 in this Court. While disposing of the writ petition, this Court directed the Department to release seized silver after depositing rotational deposits of Rs.50 lacs or equal amount of silver to be released. In this manner, the Department released silver in installments against deposit of Rs.50 lacs each time. The entire silver was, thus, released against total payment of Rs.4,20,50,000/- deposited by the petitioner from time to time on the sale of released silver. Details of this deposit are as under:

“Date of Deposit	Amt. Deposited
05-02-1999	50,00,000
15-02-1999	46,00,000
01-03-1999	60,00,000
29-10-1999	25,00,000
05-11-1999	25,00,000
15-11-1999	25,00,000
22-11-1999	25,00,000
26-11-1999	44,00,000
14-12-1999	24,00,000 16,00,000
14-02-2000	50,00,000
05-04-2000	30,50,000
Total	4,20,50,000
Cash seized and retained on 04-02-1995	49,86,500
Grand Total	4,70,36,500”

3. The necessary consequence of the aforesaid developments/orders was that against deposit of Rs.4,70,36,500/- lying with the Department, liability of the petitioner was ascertained to Rs.17,22,608/- and thus, he was entitled to refund of the balance amount along with interest. To give effect of the orders of the Settlement Commission, the Deputy Commissioner of the Income Tax [Investigation Circle, 20 (1)] passed the orders dated 11.03.1999 under Section 250 of the Act. The net demand after giving effect was arrived at Rs.3,57,73,695/- including interest under Section 234A of Rs.10,63,883/-, interest under Section 234B of the Act of Rs.1,27,66,599/-, interest under Section 234C of the Act of Rs.6,142/-, interest under Section 220(2) of the Act of Rs.50,66,660/-. This amount, however was not released to the petitioner, in spite of his request to release the same and also return Original Title Deeds of the property kept as security.

4. In the meantime, the petitioner also approached the Settlement Commission by moving application under Section 245C of the Act to determine his income for the Assessment Year 1995-96.

This application was admitted on 07.03.2000 for assessment. During the pendency of this application, certain events which took place and have bearing on the dispute involved in this writ petition may now be recapitulated. As mentioned above, according to the petitioner, the amount deposited with the Department was much more than the tax liability and therefore, he had been making request for refund of the same and till it is refunded, to keep the same in the fixed deposit bearing interest. This was not done. The petitioner was supposed to file the income tax return for the successive years, i.e., Assessment Years 1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04. He filed these returns. He was also required to pay the advance tax due and payable in respect of these income tax returns. According to the petitioner, since he was facing cash flow problems in his business and there was sufficient surplus money lying with the Department which belonged to the petitioner, he made request vide various letters for adjusting the advance tax payable out of the aforesaid amount lying with the Department. Separate letters and reminders were written in respect of each of the aforesaid assessment year. These requests of the petitioner also remained unattended. On the contrary, the AO while passing the assessment order imposed levied interest under Section 234B, Section 234C and Section 220 of the Act for making deposit of advance tax. A total demand raised was as under:

Assessment Year 1999-2000 : Rs.15,86,347/-

Assessment Year 2000-01 : Rs.22,75,638/-

Assessment Year 2001-02 : Rs.8,30,476/-

Total = Rs.46,92,461/-

5. Letter dated 11.02.2002 was written by the Department stating that the aforesaid amount would be adjusted in P.D. account with which deposit of the petitioner was lying. The petitioner objected to levy of these interest & demand and filed rectification application under Section 154 of the Act in respect of these assessment years.

6. While this was pending, the Income Tax Settlement Commission finally disposed of settlement application preferred by the petitioner vide order dated 07.07.2003 passed under Section 245D(4) of the Act. Vide this order, income of the petitioner for the assessment year 1995-96 was assessed at Rs.43,69,023/- on which tax was of Rs.1,78,430/-. After this order was passed, the petitioner again requested for release of the amount as the final tax payable for the assessment year 1995-96 was only Rs.17.22 lacs. The petitioner approached various authorities in this behalf including the ITO, CBDT, Commissioner of Income Tax, etc. He even faced claim from one M/s. Inter Gold (India) Limited, his supplier whom he could not make payment who filed OMP No.61 of 2004. In that OMP, this Court directed the Department to issue refund due to the petitioner by making the payment of Rs.4,20,00,000/- to the said M/s. Inter Gold (India) Limited.

7. Ultimately, order dated 27.09.2004 was passed by the AO giving effect to the orders of the Income Tax Settlement Commission. As per this order, refund payable to the petitioner was Rs.4,69,50,288/- and since the sum of Rs.4,20,00,000/- was already paid to the Inter Gold (India) Limited, balance amount of Rs.49,50,288/- was refunded to the petitioner. While computing the amount, the AO adjusted the interest charged from the petitioner in respect of non-payment of advance tax pertaining to the Assessment Years 1999-2000, 2001-02. That is the first grievance of the petitioner. The interest charged is as under:

Asst. Yr.	1995-96	1999-00	2000-01	2001-02	2002-03	Total
Interest under Section 234A	68,226	--	--	--
Interest under Section 234B	8,18,712 2,75,491	5,30,541	5,54,920	1,03,581 5,06,491	38,391
Interest under Section234C	--	55,042	90,471	38,220
Total	11,62,429	5,85,583	6,45,391	6,48,292	38,391	30,80,086

INTEREST UNDER SECTION 220(2)

						TOTAL
Interest under section 220 (2)	3,33,960 4,64,886	3,70,798	5,31,927	57,220 30,105	15,310
TOTAL	7,98,846	3,70,798	5,31,927	87,325	15,310	18,04,206

8. Secondly, while calculating interest payable to the petitioner, the Department has admitted that an amount of Rs.4,39,91,00/- against the amount of Rs.4,70,36,500/-. However, the alleged draft of Rs.30.50 lacs dated 05.04.2000 to have been paid finds no mention in the Public Deposit account of M/s. Foto Traders. No original record is available in this regard with the Department. We are not concerned with this, as it is fairly stated that in this regard, litigation between the parties is pending in this Court.

9. Insofar as interest payable to the petitioner on the aforesaid deposit is concerned, the Department has calculated the same with effect from the date when the amount was transferred into the account of AO from P.D. Account. The petitioner claims that he is entitled to interest under Section 132B of the Act at least till the time order is passed by the Income Tax Settlement Commission on 07.07.2003d, whereas the Department on 27.09.2004, the Department had granted interest under Section 244A of the Act ignoring provisions of Section 132B completely. The claim of the petitioner is that under Section 132B of the Act, he is entitled to interest after six months from the date of order passed under Section 132(5) of the Act on initial seized amount of Rs.49,86,500/- minus tax due/payable and on further deposits in P.D. Account from the date of such deposit. In this backdrop, following reliefs are sought by the petitioner in this petition:

“a.(i) Issue appropriate writ, direction or order to the respondents declaring that no interest could be charged on such alleged demands raised for Assessment Years 1995-96, 1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04 in view of the sufficient amount lying and deposited with the Income Tax Department since 1995.

a(ii) Issue appropriate writ, direction or order to the respondent to quash and/or set aside impugned actions of respondents in levying interest charged for Assessment years 1995-96, 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 in view of sufficient amount lying and deposited with the Income Tax Department since 1995.

a(iii) Issue appropriate writ, direction or order to the respondents that they should refund an amount of Rs.48,16,066/- as being interest illegally recovered (as per statement marked as Annexure – 43 enclosed) by deducting from amount refundable.

b.(i) Issue appropriate writ, direction or order to the respondent that petitioner is entitled for interest from the date of deposit of money in Public Deposit Account and consequentially, respondent be directed to pay the petitioner the interest amount in accordance with law and as described in statement enclosed marked as ANNEXURE – 42.

b.(ii) Issue appropriate writ, direction or order to the respondents that petitioner is entitled for interest on the amount illegally adjusted from refund. Interest has already been covered in the statement marked as ANNEXURE -42.

c. Award cost to the petitioner.

d. Pass such further order or orders as this Court may deem fit and proper in the facts and circumstances of the case.”

10. It would be clear from the above that this petition basically raises two issues, viz.,

(i) Whether interest under Sections 234A, 234B, 234C and 220 (2) of the Act could be charged when according to the petitioner, sufficient amount of the petitioner was lying deposited with the Department wherever advance tax could be adjusted?

(ii) From which date the petitioner is entitled to interest on the amount which became refundable after giving effect to the orders passed by the Income Tax Settlement Commission?

ISSUE NO.(1):

11. Submissions made by the learned counsel for the petitioner on the basis of which he has argued that no interest could be charged for non-payment of advance tax was that there was sufficient amount was already lying with the Department. The Department, however, contends that it was not permissible for the petitioner to seek adjustment from the amount lying with the Department, which in fact belonged to M/s. Foto Traders and the same was assessed as unregistered partnership and not as the sole proprietorship of the petitioner. To support this plea, the Department has relied upon the statement of the petitioner himself at the time of search/survey, which was given on oath stating that material seized belonging to M/s. Foto Traders. The Panchnama was also prepared at the address of M/s. Foto Traders at Chandni Chowk. It is the petitioner who had changed the stand later on contending that M/s. Foto Traders was not a partnership firm, but his sole proprietorship, a protective assessment order was passed in the status of firm. This order was even confirmed by the CIT (A) vide order dated 17.03.1999 and only thereafter, adjustments from P.D. Account of M/s. Foto Traders beginning from 31.03.1999 were made. Therefore, as per the Department, there was a dispute about the amounts seized and/or rotational payments either belonged to M/s. Foto Traders or Mr. Khanna in his personal capacity. That dispute was ultimately settled vide order under Section 245D(4) of the Act dated 07.07.2003 passed by the Income Tax Settlement Commission. Hence, no amount was available for adjustment of the demands raised in the case of Shri V.N. Khanna upto 07.07.2003.

12. Under Section 234B of the Act, interest is payable by the assessee if there is default in payment of advance tax. Likewise, under Section 234C of the Act, interest can be charged for deferment of advance tax. On the other hand, when the income is assessed and the tax is payable for which notice of demand under Section 156 of the Act is issued and the tax payable is not deposited within 30 days of the service, the assessee would be deemed in default.

13. Taking shelter of all these provisions, the Department has levied the interest. It is not in dispute that when the assessee filed his income tax returns for the Assessment Years 1999-2000 to 2003-04, he did not deposit advance tax due and payable in respect of these income tax returns. However, his case is that sufficient amount was tending to his credit with the Department and his request for adjustment of the advance tax, etc. was legitimate which should have been allowed by the Department. It is also not in dispute that at least Rs.4.2 Crores were lying with the Department. The only reason given by the respondent for not making adjustment from this account is that it was not permissible for the petitioner to seek adjustment from this amount, as this belonged to M/s Foto Traders which was assessed as unregistered partnership and not as the sole proprietorship of the petitioner.

14. However, to our mind, this plea taken by the respondent is totally misconceived. No doubt, M/s Foto Traders was assessed as unregistered partnership. However, the petitioner was clamouring that it was his sole proprietorship concern and had submitted proofs in respect thereof. If the plea of the petitioner was not accepted erroneously by the Department, it cannot take advantage of its own wrong. Ultimately, the petitioner was vindicated when the Settlement Commission accepted that he was the sole proprietor of M/s Foto Traders. There is an ample discussion in this behalf in the order of the Settlement Commission. The arguments of the learned counsel for the respondent that it is only on 07.07.2003 when the Settlement Commission passed the orders under Section 245D(4) of the Act that the amount became available to the petitioner, is without any substance. As stated above, the petitioner was questioning the assessment of M/s Foto Traders as unregistered partnership firm. He has been proved correct. Merely because order to this effect passed by the Settlement Commission on 07.07.2003 would not mean that it is on this date the amount became available at the hands of the petitioner. What is held by the Settlement Commission is that M/s Foto Traders is the sole proprietorship concern of the petitioner and it would follow from this finding that the request of the petitioner to adjust the advance tax from the amount lying deposited with the Department in the accounts of M/s Foto Traders was justified, which was unnecessarily turned down by the Department.

15. We are of the view that the respondent would not be justified in levying interest, as the amount of advance tax payable by the petitioner for these assessment years could be adjusted from the amount lying with the Department in the petitioner's own account.

ISSUE NO.(2):

16. Insofar as the petitioner's entitlement to interest on the amount which became refundable after giving effect to the orders passed by the Settlement Commission, it cannot be disputed that the petitioner is entitled to interest on such an amount under Section 132D (4) of the Act. This provision clearly mandates the Central Government to pay simple interest @ 1 ½ % for every month on amount by which the credit money seized under Section 132, etc. of the Act. Clause (b) sub-Section (4) of Section 132B of the Act stipulates that such interest shall run from the date immediately following the expiry of the period of 120 days from the date on which the last of the authorizations for search under Section 132 or requisition under Section 132A was executed to the date of completion of the assessment. In accordance with this provision, from the date of search and seizure of the gold, 120 days would be calculated and from the expiry of this period, the interest shall become payable.

17. This interest is upto the date of assessment. However, in the present case, even after giving effect to the orders of the Settlement Commission, the excess amount was not refunded to the petitioner. On this count, the petitioner has demanded interest under Section 132A of the Act.

18. The petitioner would, thus, be entitled to interest under Section 244A of the Act from the date of amount transferred into the account of AO from PD account after adjusting Rs.49,86,500/-, which was the tax due/payable. The amount shall be calculated accordingly.

19. Writ petition is allowed in the aforesaid terms. The petitioner shall also be entitled to cost quantified at Rs.10,000/-.